Pension Paid to Ex-Wife

[MAJ]

Here's one I've never encountered........

Court orders my client to pay ex-wife approximately $1,000 month from his pension. While paperwork is being processed he had to pay her out of his pocket. Taxes were calculated and she was paid. Going forward she gets paid directly from the pension and now receives her own 1099-R.

Court also ordered him to pay $10,000 in back pension funds already received. He pays $415 per month until it's paid off. His 1099-R reflects his full pension amount. Is there some way for him show that he didn't receive all of these funds (he has all cancelled checks totalling $4,583.15) and that they should be reported as income to her?

[Koss]

Line 31a

Those payments sound like alimony to me.

See the chart on page 134 of Publication 17 (2009).

BMK

[taxea]

Can he have the monthly payment included with the pension check she gets rather than paying it separately?

[Davc]

It sounds to me like they were slow processing a QDRO which is not alimony, it's division of property.

[MAJ]

Pension Paid to Ex-Wife

Yes.. Division of property would be more appropriate I presume. I was liking the simplicity of the alimony answer... But of course I don't know if it's that simple. This guy got taken over to coals..... and after they heated them up they brought him back.. Shame..
On the sale of the house he prepaid the alimoney instead of over time. Her lawyer was very shrewd and wrote it up to be extra divison of property and he couldn't claim the money as an alimony payment which is what he believed he could do. In reading the divorce decree it was clear that it was worded on purpose. Smart on her part - Can't believe his lawyer didn't contest. Hell, I understood it plain as day - and I's isn't a fancy edumacated laywer man.

So the current pension distributions are paid directly to her and she gets the 1099-R. This started around October 2009. Since he started receiving the pension during the divorce he was told he owed $10k. Payments are being made over two years. How would this be propery reported? I don't think it appropriate he pay the tax on it.. There's must be a proper pcocedure. I'll start on publication 17 in the mean time.

Thanks again.

[taxea]

I have always understood it to be taxable to the receipant because it is taken from the pension and when money is distributed from a pension it is taxable to her if it would be taxable to him at retirement.

[MAJ]

Taxable to the recipient but....

Understood... But HOW can I make it taxable to the recipient and more importantly remove the $4000 from my clinets taxable status. His 1099-R contains the amount. How do I justify this so the IRS is okay with it... Of course I have already requested her SS # for just such a situation.

Thanks again for the prompt reply.

[taxea]

Spouses, in many situations, are entitled to a portion of the other's retirement based on the period of time of the marriage (similar to how alimony is figured).

The spouse receiving the money is issued a 1099 and it is taxable. The portion he is paying in cash is also taxable so he should never pay her in cash. I have only had clients on the receiving end of the 1099 and have not researched the paying end...

[S T]

Had one a few years back

I had a t/p that received his pension from OPM (Office of Personnel Mgmt) and they refused to send the ex-spouse the 1099R form.

Taxpayer received the "full 1099R distribution form with no allocation to ex-spouse, so what we did was then issue under the t/p names a 1099R form to the ex-spouse for the alimony portion. On the 1040 we reported the OPM full 1099-R and then did a reduction to the spouse (paid as alimony) on the form 1040. Not sure if it was the proper handling, but iit worked, and never heard a word from IRS or State of California.

Since that time OPM has finally corrected their reporting so t/p receives a 1099R for his portion (less the amount to the ex-spouse) and the ex-spouse receives her 1099R.

Life is much simplier for this taxpayer.

Sandy

[JON]

If a QDRO

the 1099 goes to the wife because the court papers were presented to the trustee to do that. If it was for division of property what deduction would get where none. If he took distributions at first and signed them over to her, I think there is nothing you can do. If he pulled the money Ithink it is his problem. If his attorney screwed up get it from him. It has happened before where retirement funds pulled prior to or without a QDRO-the 1099 was always accepted.

If it was for alimony - it would still be income to the receipent and a deduction for alimony paid.

I am missing something.

[taxea]

I know that only business's are required to issue 1099's but is there any reg that prohibits a private person from issuing a 1099. I agree with the idea however, I disagree that this is alimony...because one can collet alimony as well as a portion of the spouse's retirement.

The ex is responsible to pay taxes on the amount received. Perhaps payroll tax law speaks to this issue on the part of the payer...I would be interested in the definitive answer but have no need to research it.

[S T]

In my example

It was not "perfect" but one of the only ways we could make sure the ex-spouse reported.

OPM would not cooperate for several years under the court ordered amount specified as alimony on a portion of the retirement. So we were doing the "paper trail" to match the IRS computers - AND we never received a notice.

It took OPM several years to finally change their system to report the proper allocation amounts to the ex-spouse and the taxpayer, and now all is wonderful now. Everyone receives their 1099R form for their proper allocation.

I have several other clients that are receiving allocated 1099R forms from DFAS(military retirement) and other retirement administrators. Seems like they finally figured it out the government reporting procedures.

Sandy

[MAJ]

and the IRS says.....

I called the preparers service line. After getting transferred around a number of times (it seemed like nobody wanted to own this one) I was told what most of us thought.
Because it was paid to him, it is reportable by him. He should have them (IF he can) change future payments from the retirement fund to include the additional $425 per month so that it gets reported to her and would be taxable by her. This should have been outlined by his attorney which in my eyes told me who NOT to use if I ever need one!! All part of the QDRO!! STBH!!

Now, I have to give him yet another piece of bad news... Last year it was he couldn't claim the lump sum alimony payment because of the working in the divorce decree. He had options - pay over time for the next 10 years or something or give a lump sum when the house was sold. Because it was a division of property and she received more it was worded that it could not be included as alimony Again, something his lawyer should have plainly advised against. It really didn't save him all that much - but lost the right to claim it as a deduction.